The extremes of the last week in Washington has displayed the turmoil that the world is in.
The chorus from this 1960’s song metaphorically discribes an irreplaceable time; like, perhaps the 20 th century – US?
On Wall Street, Tail risk is the unforeseen risk portfolio managers cannot anticipate. This is the world Economic Forum’s accessment of global risk.
America is the lone holdout that climate change is not an imminent threat. The billions of dollars in lost business activity is overlooked by deniers. Re-insurance companies are true believers.
The growing wealth at the top in societies all around the world will lead to unrest and business interruptions. These interruptions will also cost business significant dollars.
Historically, one aspect of change occurs from a financial event. These events are three act plays; Act One – the financial event; Act Two – the economic fallout; and Act Three – the political repercussions.
The questions before the world today is will the emerging Market miracle continue?
The lesser challenges of demographic change combined with a fundamental restructuring of government, will excerbate volatility .
The big picture of history.
Human output over two millennia. The 20 th century may never be repeated. Wealth, natural resources, and imagination may become truncated.
Cricises are not the failure of systems, but of men in charge of systems.
Where we were and where we are.
Tax dollars are neither good nor evil. How they are spent by governemtn and for the people determines their short-term and long term value.
America’s two economic experiments after World War II.
The elements of inflation.
The elements of deflation.
How the world works today.
100% of receipts taken in by government are paid out to individuals in various forms of income payments..
Do we have a spending problem or a revenue problem?
The remaining safety nets of FDR’s new Deal are being dismantled as the pain of the Great Depression is no longer known first-hand by politicians.
An unfettered marketplace created unhealthy and unsustainable wealth.
There are no free lunches (for the little guy).
Old habits are hard to die.
We destroyed our banking system in 2008. Then, we rebuilt it and gave it back to the perpetrators that destroyed it.
A decade-long global recession if not depression.
Interest rates have nowhere to go but up.
The cost of capital grow in the next five years.
As interest rates fall, so too will the money supply.
Inflation is selective this time around.
Without demand growth struggles.
The average working American is broke.
The middle class is disappearing.
Demand will be AWAL for some time to come.
The average American is broke.
Real Estate – ground zero for loss wealth.
MacArthur Park is melting in the dark…
The purchase of a home has lost its appeal.
Real estate is a credit driven asset. Credit is out deleveraging is in.
The worst performing real estate markets.
The nature of employment has changed from the 20 th century profile of work.
Surplus human capital is the new norm.
Unemployment will remain high over the next decade.
The Budget Control Act will these figures higher.
America will continue to privatize government.
We have an unemployment problem.
Both inflation and deflation concurrently exists.
Preceding every recession there is a spike in the price of oil.
Mass Affluence is dead.
Class Affluence is in.
Cssl august 5, 2011
Macro Economic Trends: Future Business Environments Marvin R. Clark Managing Principal Chief Economist and Investment Strategist Exploring Supplys Future: Megatrends,Volatility and the Economy A.T. Kearney Center for Strategic Supply Leadership at ISM August 5, 2011, Chicago, Illinois Monsoon Wealth Management, LLC
Our World Today Investment bubbles and depressed markets Foreign wars, deficit spending, and a double-dip recession Political unrest over power, wealth, and natural resources Growing surplus of human labor and migration issues Overleveraged western nations Global affluence migrating from west to east Climate change and unpredictable business interruptions Physical and cyber-terrorism threats rising Seven billion individual economies all wanting Twitter
MacArthur Park By Jimmy WebbCHORUSMacArthurs Park is melting in the darkAll the sweet, green icing flowing down...Someone left the cake out in the rainI dont think that I can take itcause it took so long to bake itAnd Ill never have that recipe againOh, no!
World Economic Forum - January 2011An initiative of the Risk Response Network
U.S. Post WWII Economic PoliciesKeynesian (JohnMaynard ) Supply-Side 1933 - 1980 1981 – Current Higher Taxes Lower Taxes Government Spending Smaller Government Social Safety Nets Free Markets Union Wages No minimum wage law Universal Health Care Few regulations Raise workers standard of Buyer beware living1-866-931-1846www.monsoonwealth.com
MAJOR CAUSES Of Post WW II Inflation Vietnam War 1959-1975 Great Society Programs 1964-1968 Baby Boomers entering the workforce 1967-1982 Richard Nixon’s wage and price controls 1971 Leaving the gold standard 1971 The 1st oil embargo 1973 Excessive money supply growth 1974-1979 The 2nd oil embargo 1979 Antiquated manufacturing facilities1-866-931-1846www.monsoonwealth.com
MAJOR CAUSES of Post WWII Deflation The information and digital age 1981 Personal computers 1981 Declining oil prices 1981-2000 Declining interest rates 1981-2008 Deregulation 1981 - current Non-union domestic and foreign labor 1986-2007 Globalization 1989 North America Free Trade Agreement (NAFTA) 1994 Fiber-Optics and the Internet 1994 Cheap Capital 2002 -20081-866-931-1846www.monsoonwealth.com
Current Transfer Receipts and Government Current Receipts Personal current transfer receipts Government current receipts (4– (3–22) consists of income payments 27) is the sum of current tax to persons for which no current receipts, contributions for services are performed and of net government social insurance, insurance settlements. income receipts on assets, current It is shown as the sum of transfer receipts, and current government social benefits and surplus of government enterprises. current transfer receipts from Current tax receipts (4–14) business (net) (see 2–6). consists of personal current taxes Government social benefits (3–23) (see 3–1), taxes on production and includes benefits from government imports (see 1–6), taxes on social insurance funds and social corporate income (see 2–13), and assistance benefits from certain taxes from the rest of the world other programs (4–18), which are mostly income taxes received by the Federal Government from foreigners. 1-866-931-1846 www.monsoonwealth.com
The Oughts Decade Five Bubbles Dot.com stocks Residential and commercial real estate Personal and corporate debt Blue chip stocks Commodity speculation1-866-931-1846www.monsoonwealth.com
2008: The Year Capitalism Died: Leading Causes Bear Stearns Indy Mac Fannie Mae Freddie Mac Lehman Bros. Breaking the Buck TARP 6% GDP contraction 1-866-931-1846 www.monsoonwealth.com
The New Normal An endless U.S. L-shaped recovery Multi-year U.S. consumer credit contraction Fewer U.S. public services Austerity and a reduced standard of living Global deflation and inflation, together Developed nations going Neofeudalism BRIC(hina), Emerging, and Frontier Markets1-866-931-1846www.monsoonwealth.com
Digitas Proprietary Study Abstract "Affluence in America: The New Consumer Landscape
Digitas Proprietary Study"Affluence in America: The New Consumer Landscape53% of the Once-dominant "Mass Affluent" ($100-199Kincome) Now Consider Themselves Middle Class;Rise of the "Class Affluent" ($200K + income) and the"Emerging Affluent" (35 years old or younger)The study reveals that the future of affluence is not like the past,and that "mass affluence" has given way to the spending power ofthe truly and the up-and-coming affluent -- the "Class Affluent"and the "Emerging Affluent.“
Digitas Proprietary Study"Affluence in America: The New Consumer Landscape" The Mass Affluent ($100-$199K household income level) has disappeared. They dont have the leveraged spending power they once had and now have to live on income alone. Not surprisingly, an overwhelming majority (53%) classify themselves as middle class. They have been replaced by: The Class Affluent -- earn $200K HHI or more yearly and 54% classify themselves as upper-middle class. The Emerging Affluent -- earn $100-$199K; same as the Mass Affluent YET are under 35 years old.
Digitas Proprietary Study "Affluence in America: The New Consumer Landscape"The Rise of the Class Affluent (in a "class" by themselves): Earns between $200K HHI (the minimum threshold for true affluence in Americaaccording to our findings) and $1 million+ HHI annually. Represents the minority -- only 8.5 million in a country of 307 million people. Three tiers of Class Affluence. The Affluent -- $200K–$499K HHI -- The Creative Class: The Affluent are the creative class. They are likely to work in creative fields or industries, like software design, publishing, architecture, advertising, or journalism. The Wealthy -- $499K–$999K HHI -- The Money Class: Likely to work in Finance and Consulting. The Rich -- $1 million+ HHI -- The Leadership Class: They are individuals who run companies and influence industry. They command the highest incomes and make decisions that affect many. They can be found in high-income careers, like financial or legal services, or break-out industries like Internet properties/services or real estate.
Digitas Proprietary Study "Affluence in America: The New Consumer Landscape"Emerging Affluent: 5.5 million people who are currently in the work force and on theirway to affluence. They have the same HHI as the Mass Affluent ($100K–$199K) but are younger, under 35. The Emerging Affluent work in careers that will eventually deliver affluence -- financial services, legal services, and engineering -- but they are still in the low to middle management tiers. This group has all the attitudes of the truly affluent. They consider themselves opinion leaders, follow trends, love to travel, and are passionate about food and dining. They pursue both stylish youth-oriented brands like Scion, Diesel, and Samsung and true luxury brands like H. Stern, Tiffany, St. Ives, and D&G. What sets this group apart from all others is their intensely digital media behavior. Universally digital, members of this class use mobile devices for communicating, consuming content, enjoying music, and gaming. They use social networks and blog, and they prefer apps to 411 to research restaurants, recommend products, or get deals from marketers.
America’s Outlook: 2011-2014 Subpar GDP growth, probable double-dip recession Quantitative Easing III (QE III) Persistent high unemployment levels Decline in the middle class standard of living Rise in the affluent standard of living Loss of America’s AAA credit rating Extreme political and social unrest Unanticipated business disruptions Capital flight by business and the affluent1-866-931-1846www.monsoonwealth.com
Global Outlook: 2011-2014 Hard Chinese economic landing Collapse in Brazil’s economy Greater regional political instability Realization of a “broken Japan” Greece defaults on their debt Implosion of the Economic Union and the Euro The next financial crisis1-866-931-1846www.monsoonwealth.com
Near-term Issues Local production and distribution of goods and services Cloud computing and new areas of layoffs Cyber-terrorism as a permanent way of life China’s operational satellite system in 2012 Political elections and business scandals Public health Wikipedia The continuing unwinding of the 20th century1-866-931-1846www.monsoonwealth.com
Horizon Issues 3-D printing and fabrication technology Declining Western economic clout Declining usage of nuclear power Peak oil Climate change Food security Further 21st century geo/political realignment International payment and settlement changes Bitcoin – an internet currency. Does it have a future?1-866-931-1846www.monsoonwealth.com
Pro-active Corporate Measures Create small working group, studying the USSR’s demise Create a F.D.I.C. insured financial institution Re-evaluate the value of your markets and products Scan for business innovation coming from other’s necessity Prepare a rolodex of opposition leaders in politically unstable countries for business continuity1-866-931-1846www.monsoonwealth.com
Defensive Corporate Measures Anticipate volatile price swings in raw materials Anticipate disruptions in sensitive geo/political areas Be prepared to abandon markets and products Discount the overly optimistic Emerging Market thesis Discount 20th century data sets and behavior patterns1-866-931-1846www.monsoonwealth.com